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Van Elle – founder-seeking-to-return EGM requisitioner hits out & company responds

By Steve Moore | Tuesday 5 December 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Previously writing on Van Elle Holdings (VANL) last month it was as it updates on trading & CEO to step down as responds to General Meeting requisition. The latter is from its founder seeking to return – and he has since detailed why, with the company now further responding…

Michael Ellis states “until I left VNL, it had enjoyed a history of sustained growth. From founding, I grew VNL to be the largest, most profitable geotechnical contractor in the UK. An investment of £25,000 in 2003 translated into a £1.27m shareholding at IPO, with the worst recession in living memory midway… Since my departure, VNL has disappointed”. The company argues “continued” growth, but I’ve previously noted a profit warning less than 5 months after AIM IPO and forecasts of 12p of earnings per share for the current year and 13.5p next year comparing to earlier forecasts of 15.9p and 17.7p respectively (an adjusted unchanged from the prior year 12.1p was delivered last year).

Ellis also argues “Rail’s problems are not due to circumstances beyond VNL’s control. Rail has had three divisional directors in twelve months. (stepping-down company CEO) Mr Fenton confirmed at the AGM that “there was plenty of work out there”, but there have been significant losses for VNL whilst other firms in the sector are thriving”, that “morale is low due to management’s failure to recognise the importance of its staff and to treat them accordingly” and that “value enhancing opportunities have already been missed. No member of the executive team has experience of executing or integrating an acquisition”.

The company has responded that it “actively engages with staff across the group”, pointing to it “upgraded to a Silver "Investors in People" accreditation. This award represents an improvement on the group's previous Standard accreditation achieved in 2013” and a current 2017 reduced level of voluntary staff leavers from 13% in 2016 to 10%. It adds it has investigated “a number” of potential acquisition targets, but that it “remains disciplined in its approach and focused on ensuring it makes the right acquisitions at the right value and at the right time”.

Hmmm. I’d argue Ellis makes a number of valid points in the above – and for shareholders, with the shares slightly down from the 100p October 2016 IPO before the requisition was announced, it’s these against that “this board of eight directors, envisaged by Mr Ellis, would include himself, his son-in-law and the three unnamed non-executive directors selected by Mr Ellis without an independent board selection process” (“a retired senior director of one of the UK’s largest construction groups, a senior partner in a top 5 city accounting firm and an experienced corporate and financial communications director”). Faites vos jeux. Presently at 85.5p, ahead of seeing what the impacts of the 15th December EGM results are, on the shares I currently retain a watching brief.


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